In Philippines, banana growers feel effect of South China Sea dispute

PANABO, Philippines — Dazzled by the opportunities offered by China’s vast and increasingly prosperous populace, Renante Flores Bangoy, the owner of a small banana plantation here in the southern Philippines, decided three years ago to stop selling to multinational fruit corporations and stake his future on Chinese appetites. Through a local exporter, he started shipping all his fruit to China.

Today, his estate on the tropical island of Mindanao is scattered with heaps of rotting bananas. For seven weeks now — ever since an aging U.S.-supplied Philippine warship squared off with Chinese vessels near a disputed shoal in the South China Sea — Bangoy has not been able to sell a single banana to China.

He is a victim of sudden Chinese restrictions on banana imports from the Philippines that China says have been imposed for health reasons but that Bangoy and other growers view as retaliation for a recent flare-up in contested waters around Scarborough Shoal.

“They just stopped buying,” Bangoy said. “It is a big disaster.”

His plight points to the volatile nationalist passions that lie just beneath the placid surface of Asia’s economic boom. It also underscores how quickly quarrels rooted in the distant past can disrupt the promise of a new era of shared prosperity and peace between rising China and its neighbors.

Scarborough Shoal, a cluster of coral reefs and islets, lies more than 500 miles from the Chinese mainland and 140 miles off the northern coast of the Philippines, well within a 200-nautical-mile “exclusive economic zone” provided for by the U.N. Convention on the Law of the Sea. But China — which claims most of the South China Sea, including portions also claimed by the Philippines, Vietnam, Malaysia, Brunei and Taiwan — insists that the shoal has been part of its territory since at least the 13th century and points to old maps that mark it as Chinese.

For a while, it looked as if the quarrel — which began in April when a Philippine warship confronted Chinese fishermen near the shoal and stirred a surge of nationalist fury in both countries — could tip into armed conflict between Asia’s most potent military power and one of its puniest. China last year spent $129 billion on its armed forces, 58 times as much as the Philippines, according to data compiled by the Stockholm International Peace Research Institute. The flagship of Manila’s navy, the boat that intercepted the Chinese fishermen, is a 45-year-old hand-me-down from the U.S. Coast Guard.

Manila does have one potent asset: a 1951 mutual defense treaty with Washington that the Philippines believes puts the world’s most powerful navy on its side. The United States has a policy of not taking a position on territorial disputes in the South China Sea and has been ambiguous about what it would do in the event of a conflict. President Benigno Aquino III visited the State Department and the White House on Friday to press for clarity on U.S. intentions.

Trade as ‘foreign policy tool’

Although rich in fish and long used as a shelter by Chinese and Philippine fishermen, Scarborough Shoal has no major economic or strategic value. But it has acquired great significance for both countries as a test case for issues of sovereignty that will help determine who gets to exploit potentially large reserves of natural gas and oil in other contested areas of the South China Sea.

China and the Philippines have stepped back from the brink, curbing their angry rhetoric and halting a buildup of ships near the shoal, which the Chinese call Huangyan Island and the Filipinos know as Panatag Shoal. But bananas are the Philippines’s second-biggest agricultural export, and for growers more than 700 miles from the disputed area, the damage is done.

“We are collateral damage,” said Stephen Antig, executive director of the Pilipino Banana Growers and Exporters Association, a group based in Mindanao’s Davao City, the center of the Philippine banana business.

He estimates that as many as 200,000 people in the region will lose their livelihood if China continues to curb imports. Antig had been due to visit China soon to talk to buyers but is going instead to Iran and several Arab countries in search of substitute markets.

The tourism industry, meanwhile, has been hammered by a rash of abrupt cancellations of vacation bookings from China after a travel advisory issued by Beijing. Aquino, speaking Friday to Washington Post editors and reporters, said: “That advisory, we think, was very unfounded. They were portraying us as being anti-Chinese.’’

China denies mixing politics and business, and it regularly condemns boycotts announced by others. But Beijing has a clear record of quietly using trade to punish countries it quarrels with.

When the Oslo-based Nobel Peace Prize committee announced in late 2010 that it would honor jailed Chinese dissident Liu Xiaobo, Beijing reacted with fury. Norwegian exports of fresh and frozen salmon to China collapsed, falling by 59 percent last year. Imports of the fish from elsewhere soared. There has been no formal Chinese order restricting imports from Norway, only stringent new food-safety regulations that have mysteriously targeted Norwegian fish.

A 2010 study by two scholars at Germany’s Gottingen University found a direct correlation between China’s foreign policy agenda and trade flows. It noted that China’s authoritarian political system and the large role played by the state in its economy “gives leeway for the utilization of trade flows as a foreign policy tool.”

Analyzing data between 1991 and 2008 from 159 trading partners of China, the study found that countries whose leaders met with the Dalai Lama, the exiled Tibetan leader, suffered a swift decline of 8.1 percent to 16.9 percent in exports to China.

It said that the phenomenon began after China’s current leader, Hu Jintao, took charge of the ruling Communist Party in 2002, a period that has coincided with a surge in Chinese economic and military power. Beijing reviles the Buddhist monk, a Nobel Peace Prize winner, as a subversive “splittist” and “terrorist” and demands that foreign governments not receive him.

Bangoy, the banana grower in Panabo, has no doubt that his China woes are connected to the Scarborough Shoal fracas. The Philippines, he noted, “has been selling bananas to China for more than 10 years without problems, so why did this suddenly happen now?”

Unable to sell his fruit because neither local exporters nor Chinese buyers want to risk having their shipments held up for weeks and then rejected by customs inspectors, he has shut down his packing facilities and is praying that the storm will soon pass. His workers still chop bunches of bananas but only because leaving them unharvested would cause disease.

“All this is worthless,” he said, pointing to piles of decaying fruit scattered throughout his plantation. “We have to look for alternatives,” he said. Otherwise, “this whole industry will die.”

Before the crisis, China took about a quarter of all bananas exported by the Philippines. This is less than the amount taken by Japan, but China stirred far more excitement among Philippine growers because its appetite just kept growing. Chinese imports of Philippine bananas rose by 27 percent last year and had been expected to increase by up to 40 percent this year, said Antig of the growers association.

Today, with China-bound refrigerated containers piling up at the Davao City port, the town has “been flooded with free bananas,” said the mayor, Sara Duterte. Traders have donated “boxes and boxes of bananas,” she said, prompting city hall to set up a distribution network to deliver free fruit to schools, orphanages and government offices.

The government in Manila, eager to end a tug of war with China that it has little chance of winning, has not publicly disputed Beijing’s assertion that the collapse of banana exports to China is due to health concerns, not politics.

Speaking to The Post on Friday, Aquino said there was “some basis’’ to believe that China is acting at least partly out of legitimate contamination concerns. Asked about China’s approach to his country, Aquino expressed puzzlement: “We’re still analyzing, frankly, what their intentions are. There are some who are very nationalistic, there are some who are very outward looking.’’

‘They know where to hit us’

China sent an initial warning to the Philippines about the health of its bananas in March, several weeks before the start of the South China Sea standoff. But the warning targeted fruit from a single Japanese conglomerate operating in Mindanao and led to no general curbs on imports.

In early May, however, after the Philippine navy confronted Chinese fishing boats near Scarborough Shoal, China’s General Administration of Quality Supervision, Inspection and Quarantine sharply escalated the health issue, saying in a letter to the Philippine Department of Agriculture that it had found 104 types of “harmful organisms” in bananas and other fruit sent from the Philippines.

Antig said he thinks “they just went on the Internet and found a list of all the diseases that attack bananas.” The real reason for China’s sudden vigilance is not disease but Scarborough Shoal, he said, adding, “They know where to hit us.”

Bananas are the mainstay of the economy in the region around Davao City, an area that in the 1980s slipped into chaos as Marxist rebels of the New People’s Army put down deep roots in impoverished villages and spread terror in the city with a campaign of assassinations.

Bangoy, the banana grower in Panabo, a district just north of Davao City, said that hamlets around his plantation once swarmed with NPA guerrillas but that, thanks to banana-led economic growth, the insurgents have now lost much of their appeal. “They will be back,” he said, if Chinese import restrictions remain in force and push banana growers into bankruptcy.

In other parts of Mindanao, the Philippine military, with help from U.S. troops, is fighting to contain an insurgency by Muslim militants.

Local officials in Panabo are being deluged with requests for assistance from plantation workers laid off because of the squeeze on exports to China. “Laborers are crying for an income and are all asking us for help,” said Henry Esparagola, the town’s administrator.

Left-wing activists accuse banana growers of exaggerating their China woes to deflect pressure for higher wages and an end to restrictions on trade union organization. But, in a sign of how the Scarborough Shoal dispute has united the country’s feuding political groups, they, too, insist that the territory belongs to the Philippines and that Communist Party-ruled China must back off. “How can it claim to be socialist when it oppresses a poor, marginalized sovereign country like the Philippines?” asked Joel Virador, vice chairman of the May 1st Labor Movement, a leftist union.

Duterte, the mayor, said that in the past Scarborough Shoal “just wasn’t an issue at all” for most locals. She had never even heard of it until the recent flare-up made headlines, she said. The mayor still thinks the Philippines can gain in the long run from China’s rise and has enrolled her 4-year-old daughter in a local Chinese-language school. “You cannot ignore China,” she said. “It is a very big market.”

But the mayor does have one big worry: “They know their power and how to use it.”